The euro dropped 0.4%, before recovering slightly to $1.1340, the Australian dollar shed 0.6%, and the yen gained nearly 0.2% to 115.24 per dollar
The dollar bounced in the Asia session on Thursday after a Russian news report of mortar fire in eastern Ukraine sent investors worried about a wider war scurrying for safety.
Russian-backed rebels accused Ukrainian forces of shelling their territory in violation of agreements aimed at ending conflict in the contested Donbass, the RIA news agency said.
The euro dropped 0.4% on the report, before recovering slightly to $1.1340. The risk-sensitive Australian dollar shed 0.6%. The safe-haven yen gained nearly 0.2% to 115.24 per dollar.
There is a lot of anxiety, said Bank of Singapore strategist Moh Siong Sim. It’s not clear whether it’s some local event or something which could flare up, right now such headlines are keeping the markets a bit nervous.
The Russian rouble, which has been sensitive to the prospect of war as sanctions loom, dropped 0.6%.
The standoff on Europe’s eastern edge is one of the deepest crises in East-West relations for decades. Earlier in the Asia day, a U.S. official said Russia was increasing troop numbers near its border with Ukraine rather than withdrawing, as Moscow claimed.
The official, who spoke on condition of anonymity, also said Russia could ‘launch a false pretext at any moment’ to justify an invasion.
Safe-haven Treasuries rallied and U.S. stock futures fell with the mood in Asia, though the lack of clarity around the situation capped larger moves.
The Australian dollar was last down 0.3% at $0.7178. The U.S. dollar index was up 0.1% to 95.952.
Economic data also added some support to the dollar on Thursday, offsetting some overnight softness when minutes from the Federal Reserve’s last meeting were less hawkish than some investors had expected.